Prime Minister Andy Burnham has thrown his weight behind a new £1 billion UK Scale-up Fund designed to channel pension savings into the country’s fastest-growing science and technology companies. The announcement, made on Monday 27 July alongside the Department for Business, Innovation, Science and Trade, HM Treasury and the British Business Bank, brings together several of the country’s largest pension providers in a first-of-its-kind attempt to keep high-growth British firms funded, and owned, at home.
The UK Scale-up Fund would gather commitments from institutional investors managing hundreds of billions of pounds in retirement savings and redirect a portion of that capital toward companies that have already proven their technology works but still need serious money to commercialise it, hire staff and expand into new markets. Railpen, Nest, Border to Coast, LGPS Central and Local Pensions Partnership Investments are named as the pension groups exploring participation, spanning defined contribution, defined benefit and Local Government Pension Scheme funds.
The British Business Bank is working alongside the pension providers to help launch the vehicle and intends to co-invest alongside the group, while the Office for Investment, a unit sitting within the Treasury, is supporting the consortium as it works through the practicalities of standing up the fund. A process to appoint a manager for the proposed vehicle is expected to begin shortly, according to the government’s official announcement published on GOV.UK on Monday.
What the UK Scale-up Fund Will Do
At its core, the UK Scale-up Fund is meant to solve a very specific problem: British companies that have moved past the earliest, riskiest stage of their life but are not yet large enough to attract traditional private equity investors. Industry practitioners often describe this gap as the point where a business has a working product, paying customers and a credible growth plan, yet still struggles to raise the tens of millions of pounds needed to scale operations domestically. A company at seed stage typically needs hundreds of thousands of pounds; one further along, having already raised a Series A or B round, may need fifty million pounds or more to build out manufacturing capacity, expand sales teams internationally or fund clinical trials, and it is precisely at that point that domestic capital tends to dry up.
Rather than functioning as a single pooled account, the fund is structured as a consortium arrangement, with each participating pension scheme expected to commit capital under its own governance and investment mandate while sharing access to a common pipeline of opportunities sourced with help from the British Business Bank. That structure mirrors an approach several of the providers have already tested individually, but it aims to achieve a scale that no single scheme could reach on its own. Nest, for instance, had already signalled ambitions to allocate up to £1 billion toward venture capital strategies through a separate partnership with an asset manager, and the new consortium fund appears designed to build on that momentum rather than replace it.
The fund’s stated focus is science and technology businesses, a category that spans everything from life sciences and advanced manufacturing to artificial intelligence and clean energy start-ups. Ministers have framed the initiative as part of a broader industrial strategy that identifies sectors expected to drive regional job creation, arguing that keeping this kind of capital, and the intellectual property it supports, inside the UK strengthens local economies rather than exporting the upside to overseas investors. Notes accompanying the announcement confirm that asset managers interested in running the vehicle have been invited to register their interest directly with the British Business Bank as the search for a manager begins.
Prime Minister Andy Burnham described the announcement as a vote of confidence in British business, framing it as part of a wider push to rebuild domestic industrial capacity. The government’s official statement quotes Burnham saying the initiative would help unlock good growth in every postcode, linking pension investment directly to the entrepreneurs and technologies he wants to see driving regional job creation. He has previously argued that Britain’s regions have been left behind by growth concentrated too heavily in London and the South East, and the scale-up fund is being pitched as one lever for correcting that imbalance across the country.
Business, Innovation, Science and Trade Secretary Jonathan Reynolds said Britain’s strength in science and innovation needs to translate into more homegrown companies choosing to start, scale and remain in the UK rather than relocating or selling to overseas buyers once they outgrow domestic funding options. Chancellor of the Exchequer John Healey struck a similar note, pointing out that the UK already runs the third-largest venture capital market in the world yet consistently fails to convert that early promise into companies that grow, and stay, on British soil using British money.
Why Britain Needs a Scale-up Fund
The announcement did not emerge in isolation. It builds directly on the Mansion House Accord, signed in May 2025 by seventeen pension providers who collectively pledged to shift more of their portfolios toward UK growth assets, including unlisted equities, infrastructure and venture capital, with a combined commitment reported at roughly £50 billion. That accord effectively set the terms of a new relationship between the pension industry and the government, one built on voluntary allocation targets rather than mandation, and it laid the groundwork that made Monday’s consortium announcement possible.
Despite that pledge, industry figures suggest actual movement into venture-style investment has been slower than hoped. British pension schemes have historically allocated far less to domestic venture capital than their counterparts in the United States, Canada or Australia, a gap that has real consequences for where growing companies end up headquartered. Oxford Science Enterprises chief executive Ed Bussey has previously highlighted that the bulk of external capital raised by his portfolio companies came from American investors rather than domestic backers, and trade body figures put the share of UK scale-up funding sourced from overseas as high as 80 percent, a statistic ministers have cited repeatedly to justify the urgency behind the new fund.
The pattern tends to follow a familiar arc. A researcher develops a breakthrough at a British university, early seed money arrives from UK angel investors or small venture funds, and the business grows to the point where it needs fifty or a hundred million pounds to properly commercialise its technology. At that stage, the conversation shifts almost entirely to American or European investors, who often demand relocation, a US listing, or terms that pull long-term value away from Britain. The UK Scale-up Fund is designed to intervene precisely at that pinch point, giving domestic institutional capital a credible seat at the table before a company looks abroad, and before decisions about headquarters or public listings are effectively made for it by whoever is willing to write the largest cheque.
Railpen has argued publicly that this bottleneck reduces the overall pool of investible opportunities available to UK pension schemes over time, since companies that leave early for foreign capital rarely return their full economic value to British savers or the wider economy. The scheme’s leadership has also acknowledged that not every pension provider has the internal expertise to assess, price and monitor private company investments, which is part of why a shared consortium structure, rather than isolated individual mandates, is being pursued for the new fund. Pooling expertise alongside capital is expected to lower the operational barrier that has kept many smaller schemes out of venture-style investing entirely.
The debate over where growth capital comes from is not abstract for Britain’s technology sector. Companies born out of British university research, including chip designer Arm Holdings and artificial intelligence pioneer DeepMind, have become case studies cited repeatedly by ministers and investors alike. One pursued a stock market listing overseas at a pivotal moment in its growth, and the other was acquired by an American technology giant rather than scaling independently with domestic backing. Neither outcome is framed as a failure by the companies involved, but both are held up by supporters of the UK Scale-up Fund as evidence of what happens when domestic capital is not available in sufficient scale at the moment a business needs it most.
Policymakers argue that keeping ownership and decision-making inside the UK, rather than simply keeping a company’s operations physically located in Britain, is what ultimately protects long-term tax revenue, senior job creation and control over valuable intellectual property. A company can remain headquartered in Manchester or Cambridge while still being majority owned and effectively directed from Silicon Valley or Wall Street, and it is that distinction, ownership rather than address, that the government hopes the new fund will start to shift over time.
The British Business Bank’s own capacity has grown substantially in the run-up to this announcement. Its financial firepower was expanded to £25.6 billion in 2025, giving it significantly more resources to support innovative smaller businesses, and its existing British Growth Partnership vehicle had already attracted interest from institutions including Aegon, NatWest Cushon and London CIV before the UK Scale-up Fund was announced. That track record appears to have given ministers confidence that a larger, purpose-built consortium fund focused specifically on scale-up capital could succeed where earlier, smaller initiatives had only partly closed the gap.
Reaction From Pension Providers and the Wider Industry
Railpen chief executive Andy Bord said the scheme’s priority remains delivering strong long-term outcomes for its members, describing the UK as a dynamic powerhouse of innovation and framing the new vehicle as an opportunity for patient capital to support growing companies while generating lasting returns. Nest chief executive Ian Cornelius pointed to the pension provider’s role as a long-term investor on behalf of more than fourteen million members, arguing that pension capital has an important part to play in helping successful British businesses secure the funding needed to expand.
Chris Rule of Local Pensions Partnership Investments said the initiative reflects the value of institutions working together to build scale, pointing to the evolution of the wider Local Government Pension Scheme as evidence that collaboration between funds can deliver better outcomes than any single scheme acting alone. Richard Law-Deeks of LGPS Central welcomed the chance to explore whether the new vehicle could offer a practical route for long-term local government pension capital, while stressing that every investment decision has to start from a responsibility to deliver solid outcomes for scheme members rather than political goodwill.
Border to Coast chief executive Rachel Elwell linked the announcement to her own scheme’s existing UK Opportunities strategy, describing the collaboration as a way to combine scale, investment discipline and a strong pipeline of quality opportunities. British Business Bank chief investment officer Leandros Kalisperas characterised the announcement as an important step in strengthening Britain’s capital formation ecosystem, arguing that bringing long-term pension money together with ambitious growth businesses can create a cycle that attracts further private investment over time.
Reaction from outside the consortium has been broadly positive, though not without caveats. Michael Moore, chief executive of trade body UK Private Capital, told Pensions Expert it was vital that more pension capital reaches specialist venture and growth funds, while calling on more defined contribution schemes to move with greater urgency toward this kind of investment. That note of caution was echoed more directly by Elisabeth Storey, head of pensions at RSM UK, who warned that trustees will need confidence that any increased allocation to growth assets is backed by strong governance and clear investment rationale rather than political pressure to participate simply because ministers have endorsed the idea.
That tension, between the government’s desire to unlock pension capital quickly and trustees’ fiduciary duty to scheme members, has shadowed the wider push toward UK growth investment for more than a year. Schemes considering the fund will still need to satisfy themselves that any allocation meets ordinary risk, return and liquidity tests, since pension trustees cannot simply follow ministerial ambition without independent justification. The government appears aware of this, framing participation as an opportunity pension schemes can choose to join rather than a mandated allocation, a distinction that may prove important if the fund is to avoid the criticism levelled at more heavy-handed attempts to direct pension capital in the past.
The timing also lands against a wider backdrop of competition for scale-up capital across Europe. Reports earlier this year suggested France had sought to limit British participation in the European Union’s own multibillion-euro Scaleup Europe Fund, a development that added urgency to calls for the UK to build a comparable domestic vehicle rather than relying on continental access that may not remain guaranteed. Framed against that context, the UK Scale-up Fund reads as much as a hedge against shifting European access as it does a purely domestic growth policy, giving British scale-ups an alternative source of large-ticket funding regardless of how EU negotiations unfold.
What Happens Next for the UK Scale-up Fund
For now, the UK Scale-up Fund remains at an exploratory stage rather than a fully committed vehicle. The government’s notes accompanying the announcement describe a forthcoming process of market engagement intended to identify and appoint a manager for the proposed fund, with asset managers invited to register interest with the British Business Bank directly. No final size, structure or launch date has been confirmed, and the providers involved have been careful to describe their participation as exploring establishment rather than a signed commitment, language that leaves room for individual schemes to step back if governance terms do not satisfy their trustees.
That caution reflects how complex it is to align five or more separate pension schemes, each with its own trustees, investment committees and fiduciary obligations, around a single shared investment vehicle. Similar consortium efforts elsewhere have taken well over a year to move from announcement to first capital deployment, and observers expect the UK Scale-up Fund to follow a comparable timeline as governance structures, fee arrangements and investment mandates are negotiated among the participating schemes. Manager selection alone, given the scale of capital involved, is likely to take several months once the formal search begins, and the schemes involved will want assurances about fee structures, reporting standards and exit mechanisms before any capital is formally committed to the vehicle.
Parliament’s Treasury Committee has previously welcomed government proposals to facilitate defined contribution pension fund consolidation on the grounds that larger, better-resourced schemes are typically more willing and able to take on the higher-risk, higher-potential investments that venture-style funds require. Committee members have also cautioned that any changes must properly balance risk and reward for the millions of ordinary savers whose retirement income ultimately depends on these decisions, a theme that is likely to resurface as the UK Scale-up Fund moves from concept toward an operating vehicle with real money attached to it.
Even so, the announcement marks a meaningful shift in tone from the earlier Mansion House Accord, moving the conversation from broad allocation pledges toward a concrete, named vehicle with government departments actively coordinating its formation. Whether that translates into faster capital deployment for British scale-ups will depend heavily on how quickly a manager can be appointed and how comfortable pension trustees become with private, illiquid technology investments as part of a diversified portfolio built primarily around public equities and bonds.
The broader economic case for getting this right is significant. Greater Manchester, the city region Burnham led as mayor before taking on the premiership, has already demonstrated under his leadership how targeted economic growth funding paired with private capital can accelerate regional development, and the government appears keen to apply lessons from that experience at national scale. If the fund reaches its £1 billion target and successfully connects scaling British companies with patient domestic capital, ministers hope it becomes a template other sectors of the pension industry follow rather than a one-off gesture confined to a single press release.
For British scale-ups themselves, the practical impact will not be immediate. Founders currently negotiating growth-stage funding rounds are unlikely to see UK Scale-up Fund capital on the table for at least several months while the manager selection and governance process plays out. In the meantime, the announcement sends a signal to the wider market, including pension fund trustees weighing their own growth allocations and founders planning long-term financing strategies, that domestic institutional appetite for backing British innovation is building, even if the mechanics are still being worked out. Whether that appetite converts into deployed capital, and whether it meaningfully narrows the gap that currently sends most scale-up funding overseas, will be the real test of whether Monday’s announcement changes anything beyond the headlines.
